How to Model Low Poly Nature Terrain
Ok, so, here we go. This will be the final result:



Beginnings

I came at this task with a systematic approach. I would grade everything by color and sculpt to pull out different colored landmasses from beneath a water surface plane (the lowest object in the scene). The cliff background, along with rocks, trees, and bushes, would come last.

Background Image

I downloaded the image from your question and imported it as a Background Image in the 3D Viewport Properties panel. I set the Display Axis to Camera, because it was the only relevant place that I would need the image. I also changed the Draw settings to Front because I would need to still see the image above my models; it's too complicated to do everything in Wireframe View.



Camera Settings

I also adjusted the Properties panel > Render tab > Dimensions dropdown settings so that the image wasn't stretched.



I keyed Numpad 0 to switch to Camera View, zoomed in, and checked 3D Viewport > Properties panel > View dropdown > Lock Camera to View.

Utilizing the background image, I aligned the ground plane and default cube to roughly the same orientation as the camera. Note how the grid, just barely peeking through the background image, appears to be on the same plane as the water.



Lighting

Sun Lamp

Since this is relatively simple, we'll knock it out now. Select the default Point lamp and go to the Properties panel > Object Data tab. Set the Lamp Type to Sun. Set the Size: value to 0. Click Use Nodes, and set the Strength: value to 3.0. Make sure the Color is Hex: value FFFECC.



HDR

For added realism, I prefer to use an HDR Image as an alternate light source.

Go to the Properties panel > World tab > Surface dropdown. Click Use Nodes. Click the dotted button next to the Color: input and choose Environment Texture.



Open an HDR Image. I am using the one from BlenderGuru's Cherry Blossom Tutorial.

Modeling

...and a bit of texturing.

The Water

I deleted the default cube to start and added a plane (Shift + A > Mesh > Plane). I scaled the plane up until I deemed fit (23.13). I then popped over to the Properties panel > Materials tab, ensured that I was in Cycles Render, and added a new material. I kept the default Diffuse BSDF shader but set the color to color of the water. To do that, I...


...went to the 3D Viewport Properties panel > Background Image dropdown.
...increased the Opacity: value to 1.
...went back to the Properties panel > Materials tab > Surface dropdown > Color Selection option.
...used the Ink Dropper to pick the water color.
...went to the Properties panel > Materials tab > Settings dropdown > Viewport Color.
...used the Ink Dropper to pick the Properties panel > Materials tab > Surface dropdown > Color.


You can do that or use Hex value BADDFE.



The Sand

...and basically steps for the dirt and the grass as well.

This is what I call the lightish brown stuff in the image (Hex: FFE1C8).

I duplicated the plane and moved it lower by keying Shift + D, then Z, then -.5. I keyed Tab to enter Edit Mode, keyed W to open the Specials menu, and selected Subdivide. I keyed T to toggle open/close the Toolshelf. Under the Subdivide dropdown, I changed the Number of Cuts to 10, the max.



I then subdivided again, but this time only used 3 cuts. I keyed Tab again to exit Edit Mode.



Next, I traveled to the Properties panel > Object modifiers tab and added a Triangulate modifier. I clicked Apply to apply the modifier.



I entered Sculpt Mode via the footer of the 3D Viewport. In the Toolshelf, I made sure that all mirroring was disabled. I, personally, enjoyed using a brush size of 17 px. and a strength of 0.5. I sculpted everywhere I saw sand. I did this until I felt content.

A gif of a bit of me sculpting:



The Dirt and the Grass

This is what I refer to the low lying green and dark brown coloring as. You will want to do the same thing as with the sand except that you will want to use a different material. Also, where materials are concerned:


Grass hex: DBE492.
Dirt hex: B18E7D.


What I've got so far (note that there were some white bars at the top and bottom of the image that I downloaded. I added these in for consistency's sake. I will include a blerb about how you can include them later. Note that the alternative is either shrinking the camera dimensions or making more scene):



The difference between the two:



Greyish-Brown Cliff

Hex: C4A888

I started by adding a Cylinder and scaling it up by a factor of 11. I then keyed Numpad 7, Numpad 5 to enter Top Orthographic View. I keyed Tab to enter Edit Mode. I keyed A to deselect everything. I keyed Z to toggle in/out of Wireframe View. I Box selected the following vertices.



I keyed X to open the Delete menu and selected Vertices. I then rotated my view and selected the top vertices.



I keyed . to switch the Pivot Point to 3D Cursor, which should be at the center of the scene. I keyed E, then S, then Shift + Z, then 2 to plateau my cliff face. I keyed Numpad 0 to revert to Camera View, A twice to select everything, and G, then Z, then 2.5 to move the cliff up. I keyed S, then X, then 2 to scale my cliff. I keyed G, then X, then -5 to move my cliff left. Lastly, I keyed Alt +  RMB while hovering over the back vertices that we extruded out of the top of the cliff to select them and G, then Z, then 4 to move it up. At this point, I have a cliff that looks like the following.



Now I subdivided it (3 cuts) and triangulated. And sculpted. After sculpting, I had something like the following. It's not totally accurate to the image, but it does look good.



Last thing for the cliff. I extruded and assigned the grass material to the same mesh for the grass at the top left of the cliff.

Background rest of the cliff

Stone hex: C3C3C3
Red Rock hex: E7A17D

There's no easy way for me to explain this, but I basically divided it up into chunks by color and made pieces out of various stretched and sculpted cylinders. This was my result:



But this was my scene. Not pretty, but effective:



Fillers

Pine Trees

Hex: 90C785

These I made by adding a cube, scaling it up, and scaling it down at the top.



Obviously I had to scale them slightly differently for each instance. Also, I did some occasional sculpting of the landscape beneath the trees to make it fit them, rather than vice-versa. After some work, I achieved this:



Rocks and Shrubs

For this, I added various low poly spheres which I triangulated and sculpted and placed around. I added no new materials, choosing to use the existing Pine tree, Greyish-Brown Cliff, and Red Rock materials. After adding these features, I achieved this:



The Trees

Tree Bark hex: 91604C

These I made through the simple system of extruding a low poly cylinder up and up. This was the trunk, for which I added yet another material, this one at a Hex value of 91604C The leaves were copies of a bush using the Pine Tree material again. How I arranged them was quite clever, if I do say so myself...and I do.


In the Properties panel > Scene tab, I turned off all Gravity.
I duplicated shrubs around the top of the tree.
I added a Force Field > Force with a Strength: value of -20 to the top of the tree.
In the 3D Viewport > Toolshelf > Physics tab, I Add Actived all of the leaves.
I Add Passived the tree.


The setup:



After simulating:



After simulating, which I had to do by separate trees, I had to click Bake to Keyframes for each leaf and set the Start: and End: values to the frame that I liked (119).

After making the trees, the last thing, I produced the a result that only needed some minor post-processing, which I'll explain next, to look like the image from the beginning.

Post-processing

I used 1000 Render Samples and 256x256 tiles because I rendered on my GPU. As a rough guide, refer to the following chart by BlenderGuru. Make your own tests to find out what is the optimal tile size for your system and scenes.



For the compositing, I used these nodes to add the top and bottom white borders:



How this works:


The two Box Mask nodes create a two white boxes (top and bottom) with a black background at the specified coordinates for the specified size.
The Color > MixRGB > Add node adds all values white (1) to the other creating two strips with a black (0) background.
This can be used as a Fac: between a chosen color (which just so happens to be white) and the rest of the image that I want to show.


Once again, the final result:



The .blend file:



ARadish's modified .blend file, in which the compositing and tree leaves were changed:



ARadish's compositing and corresponding explanation:




  The compositing was meant to add sepia-ish tones to the image, and make the ambient shadows darker, and orangier. I added an AO (ambient occlusion) render pass under "Render Layers" and strung this to the blue channel of the original image. After recombining RBGA, i ran a tweaked line of the AO into the black levels of the image using RGB curves. This gives me darker shadows without changing the over all contrast of the image. A tad of color balance for sepia made the image get that softer feel.


Result from ARadish's .blend: